US retail sales rise less than expected on lower petrol and car prices

Washington — US retail sales increased less than expected in May as lower prices for petrol and motor vehicles weighed on receipts at service stations and car dealerships.

Retail sales rose 0.1% last month after a downwardly revised 0.2% drop in April, the commerce department’s census bureau said on Tuesday. Retail sales were previously reported to have been unchanged in April.

Economists had forecast retail sales, which are mostly goods and are not adjusted for inflation, gaining 0.3% in May. Retail sales have in recent months been distorted by an early Easter.

The trend in sales growth has been slowing as higher prices and interest rates force households to prioritise essentials and cut back on discretionary spending.

Banks are also tightening access to credit as lower income borrowers increasingly struggle to keep up with loan payments. Though the labour market remains on a solid footing, it is becoming difficult for people who lose their jobs to quickly find new work and wage increases are moderating.

Savings have also been whittled down. Still, the pace of spending is likely to be sufficient to sustain the economic expansion.

The Federal Reserve last week kept its benchmark overnight interest rate in the current 5.25%-5.5% range, where it has been since last July. US central bank officials pushed out the start of rate cuts to perhaps as late as December, with policymakers projecting only a single quarter-percentage-point reduction for this year. They maintained their GDP growth estimates.

Retail sales excluding cars, petrol, building materials and food services rose 0.4% last month after a downwardly revised 0.5% drop in April. These so-called retail sales were previously reported to have declined 0.3% in April.

Core retail sales correspond most closely with the consumer spending component of GDP. Consumer spending increased at a 2% annualised rate in the first quarter, helping to restrain the economy to a 1.3% growth pace. Growth estimates for the second quarter are as high as a 3.1% rate.

Reuters